22nd August 2010
Prabir Purakayastha

THE civil liability for nuclear damage bill has now gone through the standing committee of the  parliament. Though some amendments have been added, the major thrust of the bill of protecting suppliers from significant damages has not only been maintained, it has even been strengthened.  Unfortunately the major opposition parties such as BJP either refused to see this aspect of the bill or tacitly agreed with the government on the “need” to protect foreign suppliers. Consequently, the government has the requisite majority now in Rajya Sabha as well to pass the bill, the only significant opposition being the Left parties.

What were the major issues with the nuclear liability bill? As has been widely written about, the total liability due to a nuclear accident has now been capped at 300 million special drawing rights (SDRs) or about Rs 2,500 crore. This cap is for the operator and the government jointly – and if any accident happens whose damages run beyond Rs 2,500 crore, the people can be denied further compensation beyond this figure. If we look at the Bhopal disaster, which was from the leak of a poisonous gas and not as devastating as a major nuclear accident can be, everybody including the government now agrees that $470 million was grossly inadequate for the damages that people suffered. The total amount that the standing committee has now agreed is less even than this inadequate Bhopal amount. This is what the major parties in the parliament – the Congress as well as the BJP have now agreed.  Not surprising, considering that both were involved in various stages of the Bhopal disaster and therefore have now a vested interest in not learning the lessons from Bhopal.

NO ARTIFICIAL CAP ON LIABILITIES

The Left’s position, as well as most other public voices have been very clear on this issue. There is no way the government can absolve itself of its liabilities. Therefore, there can be no artificial cap for damages.

What does this cap on liabilities mean? Does it mean telling the nuclear plants not to inflict damages beyond 300 million SDRs in case of an accident? Since this is patently absurd, all it means is that the government is putting a cap on what damages the claims commissioner can award; it is this that is being capped. The Left argues, as did others that there should be no cap on total liability at all – the government is responsible finally for addressing the peoples’ problems arising out of a nuclear accident and cannot therefore artificially cap its own liabilities.

The next question is considering what should be the operator’s liability? In the original bill, there was the possibility that private operators may enter the nuclear power sector and therefore would have only a small fraction of the total liability. The cap on nuclear operators was therefore seen as a concession to private capital, which might enter the nuclear energy scene in the future. The standing committee has now put two amendments – one is to limit this bill only to government or government companies as operators, the second is to raise the cap to Rs 1,500 crore.

It is welcome that the standing committee has plugged for now the possibility of private entry with such low operator liability caps to enter the nuclear power sector. Why then is there a separate liability cap for the operator when as per the current bill, the government in any case is the owner? Would it not have been simpler to introduce just one cap – 300 million SDRs equivalent as the operator cap? The mystery is solved when we look at the section 17 of the proposed bill – only the operator can exercise recourse from the supplier. Since the operator cannot take recover more damages than what he has paid out, the operator cap in this case is actually the supplier’s cap. Simply put, by limiting the government’s liability as an operator though not as government, the bill is capping the supplier’s liability to Rs 1,500 crore. The government may have to pay out more compensation beyond Rs 1,500 crore. However, as the bill stands, it cannot recover the amount beyond Rs 1,500 crore from the supplier.

The section 17 is the one that provides for suppliers' liability. The operator of a nuclear installation shall have the right of recourse where

(a) such right is expressly provided in the contract

17(b) the nuclear incident has resulted from the wilful act or gross negligence on the part of the supplier of the material, equipment, or provider of services or his employee

Both sections were independent - 17a and 17 b were to run independently. In the committee, it was agreed that the section 17 was weak and needed to be strengthened. This is also the view presented by the secretary, legislative department. The report states : In case an incident takes  place it would be difficult to prove and establish the fact that it was a wilful act or gross negligence on part of the supplier. Hence there should be clear cut liability on the supplier of nuclear equipments/material in case they are found to be defective. Clause 17(b) gives escape route to the suppliers of nuclear materials, equipments, services of his employees as their willful act or gross negligence would be difficult to establish in a civil nuclear compensation case. Mens rea, which is only amplifying the intent in clause 17(b), as argued by the secretary (legislative department) is generally used in criminal and taxation laws, but in compensation cases the use of this doctrine is grossly inadequate and misplaced. The committee therefore recommends that clause 17 (b) should be modified as: “The nuclear incident has resulted as a consequence of latent or patent defect, supply of sub-standard material, defective equipment or services or from the gross negligence on the part of the supplier of the material, equipment or services.”

After this, the real twist took place. In the last draft submitted to the committee, an extra half sentence was introduced which read that clause 17 a end with “and”, then continue to 17b.

With this, 17b can be invoked only if 17a holds: the right to recourse exists only if it is there in the contract. This is what the US  has been asking, that any recourse against the supplier should be there only if it is provided for in the contract. As it stands, it is even worse than the original provisions, where even without being in the contract, the operator could exercise his right to recourse against the suppler, even though it is difficult to prove wilful act or gross negligence.

RIGHT TO RECOURSE WEAKENED

If the stated intention of the standing committee was to strengthen clause 17, the reverse has been done – it has been weakened to make the right to recourse a mere private contractual arrangement between the supplier and the operator. The legal right of the owner to normal recourse for defective supplies under law of torts no longer exists. Worse, it has been done surreptitiously in the guise of strengthening the provision of the right to recourse.

Why has this been done when it was admitted that the provisions of clause needed to be strengthened? It is simply because the government has committed to the US that its liability law will conform to CSC. And CSC demands that suppliers liability should not be there in the liability law and can at best be in the contract. The American suppliers' had complained earlier that clause 17 as it stands allows for some legal right to the operator to seek recourse beyond the contract. This is why this right has now been extinguished and made into a contractual arrangement. And even there, the cap of Rs 1,500 crore will hold good.

The suppliers’ liability is the crucial issue for the US. They have made no bones about it and the attempt to force India to join the convention on supplementary convention (CSC) is also guided by the protection it offers to nuclear equipment suppliers. Contrary to what the Atomic Energy establishment has claimed in front of the standing committee, the fact remains the driver for India joining CSC is the US.

CSC was created as an instrument specifically post-Bhopal to protect US companies from being sued for large sums as damages. Omer Brown, the spokesperson of the nuclear suppliers’ lobby in the US, stated in a conference as far back as 1999, “Because of the large judgements and legal defence costs that unfortunately are a part of the American tort system, contractors and suppliers feel particularly vulnerable (especially to Bhopal-type lawsuits in US courts)”. It is no accident that the work by the US government to move for a stand-alone convention which would protect the suppliers started post-Bhopal, and the US is the country that initiated the CSC in IAEA. The CSC provisions are what India promised to the US during the India US nuclear deal and that is why the need for India to craft a liability law that will adhere to the provisions of the CSC.

The issue is not simply that the aims and objectives of the bill talk about joining the CSC; the issue is also the provisions of the bill, which have been crafted to ensure suppliers’ protection from damages that a nuclear accident might cause. This commitment to adhere to CSC provisions was made in writing by the then foreign secretary, Shiv Sankar Menon in a letter to the US under secretary, William Burns, (September 10, 2008), “India also recognises the importance of establishing an adequate nuclear liability regime and it is the intention of the Indian government to take all steps to adhere to the convention on supplementary compensation (CSC) for nuclear damage...”

The US has made no bones about the need to protect US suppliers and a liability to this effect. US assistant secretary of state for South and Central Asian Affairs, Robert in an interview (March 10, 2010), said, “We also are very much hoping that the Indian government will proceed with very important legislation on nuclear liability, that will be very important protection for American companies who are seeking to do more business in the civil nuclear area, in India.”

With this, the BJP has now joined the Congress in creating a bill that protects US suppliers from any defective supplies. The amount of Rs 1,500 as a damage cap on operator is way below the Bhopal disaster and what the government of India had asked from Union Carbide. It is even well below the Bhopal settlement figure of $ 470 million.

The only way to prevent this bill from being passed is for the people to demand of the legislature not to accept this shameful legislation. If this bill passes the parliament in its present form, it will add another sorry chapter in the long history of the India-US nuclear deal.